The Fed 'Potentially' Adding Insult to Injury -- And Your Weekly Macro Update

In this week's video prelude we'll explore last week's inflation numbers, the latest action in oil and its rocky relationship with interest rates, and, among other things, an under-the-surface look at what's really troubling markets of late.

The Problem

My schedule today only allows for a quick pre-market note... So just quickly touching base on this morning's CPI report and my thinking around the whole inflation conversation.

Immediately upon the report coming in hotter than expected stocks went from nicely green to notably red in pre-market action... Tech and financials look to be taking the brunt of the hit so far... Precious metals getting pretty well hammered.

Fed funds futures immediately went from essentially pricing in no rate hike at this month's meeting, to a 50/50 chance... A December hike fully priced in.

In terms of the inflation problem itself, while we think higher (than recent years') inflation is a structural reality going forward, at the moment we see it as a supply problem much more so than a demand problem, which, therein, lies the problem.

I.e., the Fed speeding up the tightening of financial conditions by raising short-term interest rates is taking aim at demand (which, btw, is the only target they have -- as they can't print oil, for example, and they can't reduce trade barriers [read tariffs]).

So, while you'll hear commentary aplenty about how the Fed needs to get more aggressive, watch what happens to inflation expectations, and ultimately the near-term numbers, when a durable Middle East solution is found and if/when trade tensions seriously ease.

The former (in terms of safe passage of oil tankers) being an inevitability over coming months, the latter is less certain.. In either case the precise timing is up in the air.

Stay tuned, I'll have much more for you over the next few days.

Why the Ecoonomy's OK Despite Consumer Surveys & Other Serious Stuff

Definitely a must-watch video for clients!

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Businesses Steady, Households Strained*

Week of October 5, 2026

Unreal That the S&P Hit an All Time High Yesterday, Literally Unreal (video)

Dear Clients, here's another (this one's short) video we'd like you to be sure and take in.

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Twists and Turns

Per yesterday's video, September was the first truly ugly month for markets since March... But now we enter a period that, even during past mid-term election years, tends to be a very good stretch for asset prices.

Of course this year's setup has more to contend with than simply domestic politicking!

For the moment, save for a yet-unconfirmed attack on an Aramco oil facility, the latest (weekend) news flow has been notably tame, relatively-speaking.

As I've pointed out, the US administration is in the eleventh hour if it intends to pull a few market levers to catch a wealth-effect edge heading into election day.

Scott Bessent taking the treasury bond buyback to its stated upside limit last week, plus Europe's giving the nod to the US's request to unleash a meaningful amount of diesel (in particular) reserves suggests that they've yet to give up on juicing market forces to perhaps sway the on-the-fence voter come early November.

Perspective on September's Swoon (video)

Dear Clients, please be sure to take a few minutes and take this one in.  Thanks!

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

We Remain Uber-Bullish On Gold (Long-Term)

Gold has been interesting to track of late... It's a not-small position for us that, since we added it, has been very profitable to own -- until this year, that is, and certainly until the past month or so.

GLD YTD:

Turbulence

Per Sunday's video, there's notable turbulence occurring just below the equity market surface.

Along with the concerning breadth readings we covered, as I type nearly 2/3rds of S&P 500 constituents are experiencing a technical bear market (down 20%+ from previous highs)... I.e., stocks -- save for the tech sector -- are struggling mightily as we enter Q4.

So what's going on?

Well, as I illustrated in my 9/23 chart pack, oil is largely running the show.

Here's Bloomberg:

"Global Equity Weakness — Late September into October 2026

The Common Thread: Oil Amplifying a Bond Market Rout

Two forces are working in tandem to pressure equities globally: a relentless rise in sovereign bond yields and an oil price that is flirting with $100/bbl. Brent crude is up ~2.5% today to around $100.49, having risen for a third consecutive month, driven by Middle East supply disruptions tied to the US-Iran conflict. Critically, oil is not just a cost headache — it is actively feeding the bond selloff by stoking inflation fears, which in turn pushes yields higher and compresses equity valuations. US 10-year Treasury yields have touched their highest since 2002 at ~5.30%, while 30-year Gilt yields have surged to 6% for the first time since 1998."

As for this morning specifically:

"US: Oil Erasing the AI Rally

The dynamic in US equities is stark. S&P 500 futures wiped out an advance of as much as 0.7% — driven by an upbeat Micron forecast — as the renewed oil climb deepened the bond selloff. (1) ISM manufacturing data this morning showed a gauge of raw-material prices jumping to its highest since May, amplifying inflation anxiety and sending the S&P 500 on track for its worst week since August. (2) A gauge of big banks lost 2%. (3) Beneath the surface, the equal-weighted S&P 500 is eyeing its seventh consecutive weekly loss — a streak seen only twice before in history — even as AI-linked megacaps hold up. (4) Oil is a key reason for the divergence: energy costs squeeze the broad market while tech remains relatively insulated."

I'll have lots to share on the topic over the weekend. 

Quick Note: Volatility notwithstanding

Just thought I'd pop in with a quick note, given the pain markets are feeling pretty much across the board this morning.

I say "pretty much" because of course anything tied to the culprit of late is catching a bid... I.e., oil-related stocks, in the aggregate, are up 2/3rds of a percent, while the likes of industrials, materials, tech, communication, financials and utilities are all seeing drawdowns of between 1 and 1.5% as I type.

Long-term bonds (which we do not own, but are a tell on conditions) are getting hammered this morning as well... As are precious metals (which we do own) to the tune of minus 4-5%.

This is a stark reversal of the rallies we experienced on Friday, which essentially tells you all you need to know for now.

That is, on Friday there were high hopes of a near-term respite that would open the straight of Hormuz... While today, those hopes have -- for the moment -- been dashed.

Make no mistake, the US/Iran affair is something that cannot persist indefinitely, at least to the extent that it chokes oil supply sufficient to -- for one example -- keep gasoline prices double what they were to start the year... And of course this is all doing a major number on the Iranian economy.

I.e., an oil-emphasized resolution is in the offing, but the market is pleading for it sooner than later.

We'll keep you posted on these short-term developments (lots of it noise), while prudently and painstakingly keeping our focus on the structural dynamics that when properly understood -- short-term volatility notwithstanding -- make for long-term investment success.

PS: Dear clients, if the recent volatility -- or, say, the latest news headlines -- are at all getting under your skin, and our next review meeting is farther out than you'd like, don't hesitate to drop me an email, there's always room to schedule a call.

Good News Has a Price

Our weekly macro report below gives the interested reader plenty to digest... And while all of it is important, well... imperative (for us), to forever monitor and assess, if I were inclined to nutshell it for you, at present I'd say you can sum up what's sustaining the US economy's strength at this late-cycle juncture as simply AI datacenter capital expenditure/investment plus the general wealth effect that has those with means spending like the good times will never end.

Headlines and Charts of The Day

As I noted yesterday:

"As for the Iran situation, while both sides have engaged in negotiations over the past week, and during the UN session, their respective speeches at said session did anything but assure markets that a deal is close at hand... Although that -- in terms of agreeing to at least a short-term respite -- can change in a heartbeat, as we've experienced."

Headlines a few minutes ago: 

Quick Morning Note

Per yesterday's message herein, the very recent action in markets has been virtually across-the-board risk-off... Although, while this morning we're once again seeing weakness in the major global equity averages, in commodities (including precious metals), and bigly in bonds, our US healthcare, communications and of course energy (as oil continues its ascent) are offsetting a bit of the pain so far this morning.

Suffice to say, September is thus far fulfilling its historical role as the worst month of the year for markets, reflected in the broader equity averages (such as the S&P 500 equal weight) in particular.

Today's Chart Pack: Oil Runs the Show!

Rough day for markets today, pretty much across the board... I.e., your most diversified portfolio took an outsized one-day hit as everything from global equities, to bonds, to precious metals got escorted to the woodshed:

What We're Watching -- And Your Weekly Macro Wrap

Clients and regular readers will note that as recently as, say, a month (or less) ago, I was firmly of the mind that the Fed would not hike rates anytime soon... A view that markets demanded that I reconsider just ahead of this week's Fed meeting.

Here's from my commentary on Tuesday, where I referenced my commentary from the previous Friday:

A Tough One For the Fed

From last Friday's note:

"...this is the environment where a hike actually could lead to lower 10 and 30-year yields... If that's the case the Fed may be comfortable hiking next week, which may have me sympathizing with the consensus after all... Although there's still the mid-term election and federal debt issues I mentioned yesterday for the Fed to contend with."

Suffice to say that a hike is what's needed to bring down longer-term rates has become the consensus view... But only if it's followed by a statement and/or press conference that implies there'll be zero hesitation to hike again should conditions dictate... I.e., the language has to be sufficiently hawkish.

Quick Market Note

Heading out for a week’s vacation, but, again, I’ll stay connected enough to comment herein if I think readers could use some perspective on anything that crops up

In the meantime, here’s my note to our team after seeing this morning’s market reaction to CPI:

Oil Prices and Interest Rates

With oil at $100/barrel and producer prices not remotely letting up, fed funds futures are pricing in a 70% chance of a rate hike come next Wednesday.

While the Fed, under previous leadership, is known for not bucking market expectations, if there was ever a time for it to do so, it's now.

The Coulds That Could Happen

I said in last week's video that "the economy could help out the Fed by slowing."  Meaning, if the jobs data were to weaken, and if CPI next week were to soften, pressure to raise the fed funds rate would abate markedly, and of course risk markets would love it.

Well, Friday's jobs number -- coming in much better than expected -- indeed did not help, and markets -- albeit not terribly -- sold off accordingly.. Although I suspect the "not terribly" had to do with the fact that under the hood the jobs data really wasn't all that stellar.

Here's from the macro wrap below:

Chart of the Day

Internal log entry this morning:

9/5/2026:

I've been telling clients that China (huge oil inventory) largely explains how oil has remained contained relative to expectations given the Iran War... That may be ending:

Different Ballgame For Bessent (video)

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

A Few Things, and Your Weekly Macro Wrap

For our lead-in to this week's macro note I'd like to share a few key highlights from our internal market log... These essentially reflect our take on the current and go-forward global investment setup.

We've had, and will continue to have, multiple discussions internally about the potential market impact of the inevitable come-down off of the extraordinary spending commitment to AI infrastructure... While there's little if any sign of a letup over the near-term, we view this as a some-day -- in the not too-distant future -- not-small market event.

Our timeline falls on the shorter end of the 1-3 year range BCA expresses in comments below:

The Elephant In the Room

Kevin Warsh just completed his highly-anticipated Jackson Hole speech, and, to no surprise, there was no mention of the elephant in the room -- which would be the treasury's financing burden going forward... 

I.e., given the enormity of the debt coming due over the next couple of years, as well as the massive current budget deficit, there's no understating the need to issue new treasury debt at rates that simply can't be allowed to rise measurably on the front-end -- despite Warsh's tough-sounding (on inflation) speech this morning.

The great irony here is that, forgive me, inflation is precisely the answer to remedying the debt problem, as it's measured -- a % of GDP.

I.e., there's no paying down the debt, that's a fantasy they're no longer willing to even insult our intelligence with... Ah, but if "we" grow the economy faster than "we" grow the debt -- a la mid-40s to early-50s, we can wake up somewhere in the future with something less than 100+% debt-to-gdp.

Curb Your Enthusiasm

If you're pumped by Nvidia's earnings report last evening and by this morning's bounce in the tech sector, allow the following to curb your enthusiasm:

That's our live US sector watchlist. Unless you're loaded up with only tech and miners, you're not feeling it this morning.

This is what you call poor breadth... The Dow, for example, is up over a hundred points as I type, yet only 5 of its 30 members are in the green... The SP500 is up 0.6%, while 60+% of its constituents are in the red.

We'll explore what's occurring under the surface in this weekend's macro wrap.

"Insanity"

Here's popular macro-thinker Kevin Muir on current and go-forward conditions, and recent (increased treasury buybacks) events.

"It is insanity to think the US economy can run at a nominal GDP of 6.5% with AI borrowing and spending exploding at the largest pace since the railroad boom, while the US government runs petal to the metal fiscal policy -- all the while geopolitical developments force other nations to also run expansionary fiscal policies -- yet not expect bond yields to rise.  Increasing liquidity support buybacks does little to change this dynamic.  

The bond market has rightfully concluded that this will not be enough.  And not only that, the gold, fx, and crypto markets have correctly sniffed out that attempts to keep bond yields down could well be inflationary.  You can't have a booming global economy and lower interest rates.  And if you try too hard it risks letting inflation run away to the upside.  The era of ultra-low bond yields is over.  

Markets and governments need to accept this new reality and adjust accordingly."

In a nutshell, and as I keep expressing, the go-forward/structural macro setup is vastly different than what you and I have grown accustomed to over the past several decades... I've articulated herein the nature of two broad regimes that course throughout history, each possessing notably different inflation dynamics, and, therefore, inspiring policy decisions that would've been -- in the opposing regime -- entirely unintuitive, often to the extreme.

And, make no mistake, each demanding a notably different investment approach as well... Something I fear is, alas, presently lost on too many investors, and advisors alike.

I have much to add to this top, but this'll suffice for the moment... I feel a video coming on 😎.

In the meantime, here's today's macro and market rundown*:

No, The US Is Not Bailing Out Japan -- And Your Weekly Macro Rundown

The past few weeks have been very interesting! And oh how recent events have been the best sort of fodder for click-baiting doomsayers.

A conversation I had the other day inspires me to revisit the recent interplay between US Treasury's Scott Bessent and the Japanese Ministry of Finance.

An acquaintance of mine had bought into the notion that the US is bailing out Japan... A notion that I'm certain he gathered via YouTube, Tick Tock, Twitter, Facebook even, or perhaps any combination of these and untold other such platforms.

Suffice to say that my attempt to disabuse him of what I presumed to be his social-media-induced-outrage was not nearly as exhaustive as what I'm about to write... For him I simply expressed that the treasury's intervention had zero to do with bailing out Japan, and everything to do with containing the long-end of the US treasury yield curve.

But, since you are particularly special to me, you get the following:

Ghosts of 2022

As I've stated aplenty herein in writing and in the videos of late, we remain constructive on equities, but with a relatively short window of confidence -- that being into late this year/early next... The ultimate headwind that we've assigned high odds of developing is precisely the one that is troubling markets as I type this morning.

In a nutshell, our view in January was that when we add up record tax refunds, a recession-level budget deficit (huge net govt spending), a new Fed chair who's appointment would come with some serious strings attached, and whatever else an administration heading toward a mid-term election can conjure up to make voters happy -- well, sure, that "should" be a recipe for higher equity prices in 2026.

On Fed Incentives, And Your Complete (and Important) Weekly Macro Rundown

According to macro analyst, liquidity expert and research provider Michael Howell in this week's Macrovoices podcast, the odds of the fed hiking interest rates relatively soon are exceedingly high... As you'll see in the following, I don't entirely sympathize.

He cites the predictive ability of 2-year treasury yields: 

"It's correct 85% of the time."

And on that I concur, as this is an indicator we have tracked very closely for years.

Here's our chart (orange line = 2yr yield, white line = fed funds rate)... Note how the current setup -- historically-speaking -- virtually assures a coming fed hike:

Some Caution on the Favorable Inflation Prints, Why We Like the Yen (again), And a Few Other Things

Lots to consider this week (underneath the headlines) in terms of data, the Fed, geopolitics, yada yada.

Thus, this weekend's macro analysis will be robust.

In the meantime, the following note will bring you up to speed.

Must-Read Macro Note

Our intro to this week's macro roundup consists simply of a handful of key/telling market highlights from my commentary over the past couple of weeks.

If you’d truly like to glimpse the forest through the trees, the macro note itself -- in terms of what’s happening below the surface and how we’re positioned for it -- is a must-read!  

This Fed is Different, AI's Inflation Impact, Gold Setup, etc (video)

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Divergence

Now, make no mistake, I'm not complaining! I can't not like the results so far this week... That said, the under-the-surface dynamics are not remotely confirming what the headlines portend.

For example: The top panel is the S&P 500... The upward trend line captures the past 4 trading days, including today... The second panel measures the number of advancing stocks in the index vs the decliners through yesterday:

That's what's called a negative or "bearish" divergence.

As for today, so far, breadth isn't terrible, with roughly 65%/35% up vs down stocks, but still not all boats rising with the tide.

As for the sectors, once again, under the headline surface there are losses being taken in 5 of the 11 major sectors as I type:

Nothing to get too excited about, just what I view as a late-cycle dynamic to respect.

Crosscurrents!

This week's note offers important insight into what's developing at and below the surface... I.e., while our PWA Index shows real, and legitimate, signs of life, there remain underlying crosscurrents that to some extent muddy the overall go-forward macro setup.

As for the equity market, as I emphasized herein during the week, on the surface (the S&P 500) stocks ended up churning out a nice showing:

While, below the surface, not so much!

6 of the 11 sectors are finishing (as I type, 40 minutes before the close on Friday) in the red:

I.e., thanks to Amazon, and Alphabet -- moving the consumer discretionary and communication sectors up a ton -- the headline tape essentially misrepresents the overall message of the market for the week.

Said message being, the late-cycle is a period of heightened uncertainty and speculation, often characterized by aggressive rotations... This particular instance being exacerbated by a seriously-stressed geopolitical backdrop.

Here's this week's PWA Index scoring summary, followed by our latest important macro deep dive (clients, this is a must-read):

The Tape Is Lying To You; Day 2

Now, to be sure, there have been many days of late deserving of a post titled The Tape is Lying, it's just that yesterday's and so far today's unusually so.

As I type, 6:40am PDT, the Dow is clinging to a 90-point gain, while the S&P 500 and the Nasdaq 100 are up by 0.17% and 0.55% respectively, so the market's up, albeit slightly, right?

Well, actually, no... Or, not mostly, I should say.

While, thanks to Amazon, our consumer discretionary position is up a very nice 2.7%, and Microsoft is delivering a second day of gains, up 2% so far this morning, virtually everything else is either essentially flat, or down a little, or a lot... The latter among US sectors being, materials -2.4%, staples -0.81%, healthcare -1.17%, financials -0.26%, industrials -0.76%, tech -0.47%... Even small caps -0.,74%, gold -2%, silver -3.2%, metals miners -1.34% are taking a hit this morning as well.

So, again, while the headline tape reads green (although, as I continue to type, the Dow has given it up, and the S&P is hugging the flatline), the broader complex of risk assets reads red, pretty much across the board.

In a nutshell, today's market is searching for direction amid what would be late-cycle dynamics exacerbated by a geopolitical situation that itself is sorely in need of direction -- or, let's say, in need of a durable solution.

Of course there's lots going on under the surface, described succinctly in the following:

The Tape Is Lying To You -- Or, "World" Being the Key Word

 I opened Tuesday's morning note with the following:

"It's days like today where stock-watchers bemoan diversification... I.e., it's been my observation over the past 40+ years of doing what I do that folks tend to see their long-term portfolios as extensions of the US equity market."

Well if all I did this morning was look at the table below, I might say, dang, another day to bemoan for the diversified investor.

US sectors on the left, the percent move so far this morning on the right:

Here you have the (cap-weighted) S&P 500 up over 1%, yet, remarkably, 8 of the 11 sectors are actually in the red, and save for financials and utilities, by not-small amounts (hence the title of this post).  In fact the S&P 500 Equal Weight Index (all the same stocks, but equal treatment of each) is down 1% as I type.

And while our core strategy indeed has a healthy-enough allocation to tech -- by itself, certainly not enough to meaningfully offset the hits to, say, healthcare and staples, which also (healthcare in particular) represent healthy weightings in our core.

However, somehow, at least as I type, we're actually capturing roughly 90% of the rise in the cap-weighted S&P 500.

So how in the world can that be? Given that I've emphasized the uber-diversification of our current strategy?

Well, key word there being "world."  Remember, we call ourselves a top down global macro money manager (with theses developed around every single position [meaning we absolutely do not use a shotgun to determine our asset mix]), and, this morning, when we look outside the US we're seeing some pretty dramatic (in one-day terms) upside action.

Our Eurozone exposure, for example, is up 2.45%, our Asia-Pac aggregated position is up 3.6%, our Japanese equity exposure by itself is up 3.2%, South Africa, Brazil and Mexico respectively are up 2.4%, 1.5% and 1.9%, yada yada... Then there are the commodity-related exposures: Uranium miners are up 3.8%, diversified miners are up 2.75%, gold up 1.3%, silver (recently added it back) up 2.5%... Among our individual equity positions, the one that really jumps off the page is recent-addition Microsoft, up a whopping 15% as I type... Not to mention, Applied Materials (a bit smaller weighting than MSFT) up 13.5%... Although we're hedging Applied Materials (AMAT) with a put option that is effectively mitigating todays move by ~6%... By the way, the AMAT put itself is nevertheless still up 69.9% since we put it on.

Anyways, let's put today into its proper perspective... For one, my report above simply illustrates, live, the potential virtues of our current strategy, and our longer-term view of the world right here... And, alas, by the end of today's session, or even by the time you receive this note (scheduled to hit your inbox an hour from now), all this happy stuff could very well have turned on its head -- based on the wild intraday action we've witnessed of late!

In the meantime, here's the bigger picture stuff that matters.

Morning Note

Given this week's calendar one might surmise that this morning's notable selloff in equities reflects worries that the Fed will lean hawkish (though they won't raise rates today), and that key tech earnings after the bell perhaps won't live up to historically-high expectations.

Well, sure, no doubt those are doubts worth mulling, but, clearly, the culprit today is yesterday's surprise attacks delivered by Iran, alongside this morning's news that oil inventories took a massive hit the last week of July... Make no mistake, strategic reserves are virtually spent at this point -- oil's up 7% as I type!

We're having a private session this morning with the head of the geopolitical team we consult with, which will likely give us more texture/context to share later in the week.

In the meantime, here's your morning macro rundown*... Clients take note of the final section titled "How We're Positioned."

Morning Note

It's days like today where stock-watchers bemoan diversification... I.e., it's been my observation over the past 40+ years of doing what I do that folks tend to see their long-term portfolios as extensions of the US equity market.

For many, if not most, US investors, I do believe that's a reasonable impulse... But for today's PWA client, well, no... In our view, particularly late in the cycle (i.e., now), broad sector, regional and asset class diversification is the definition of responsible portfolio construction.

Now, of course that's not simply shot-gunning your money across everything that moves, we do have theses that we "work" every day across different time frames... Meaning, we'll have a near-term view that may inspire the hedging of -- or the leaning into -- a position that happens to jibe perfectly with our long-term thesis, yet we see high odds of meaningful short-term turbulence... Consequently, as you clients have noticed, we'll see days, or stretches of days/weeks, where our strategy deviates -- in either direction -- from the moves in the ever-watched US stock market.

Today could be viewed as one of those days, although even the US stock market itself is all over the place.

As I type the S&P 500 is, albeit slightly, red on the session while the Dow is up nearly 400 points... Yet the Nasdaq 100 is getting slammed, down 1.5% (the equivalent of 750 Dow points).

Commodities, including precious metals, are going the way of the Nasdaq, down notably (save for ag) nearly across the board.

Consequently, if your portfolio is the size that gets the full complement of our globally-diversified core allocation, it's basically flat as I type... So I guess you can say it's going the way of the stock market, but only if you're looking at the S&P 500.

There's lots to unpack this week in terms of data, earnings and central bank decisions, so expect to hear from me aplenty as it all unfolds.

In the meantime, here's your morning rundown*... Definitely click the link and take this one in, it's an important read for clients:

Your 'Important' Weekly Rundown

Per your weekly macro roundup below, markets are pricing up the odds of a Fed response to the latest upward pressures on inflation.

Fed funds futures are currently discounting a 100% chance of a hike at the September meeting, and a 76% chance of yet another one by year-end:

While, presumably, the read from CPI swaps reflects belief that near-term Fed tightening will work to subdue go-forward inflation.

2, 5 and 10-year spreads:

Or, one might argue that swaps are reading an oil curve that anticipates notably lower go-forward pricing, as now-depleted strategic petroleum reserves pressure a near-term ceasefire. 

Of course I can push back there as well, as there'll be notable future demand for oil as those reserves (and some, I suspect) will need to be replenished over the next 1-2 years... Add to that the current state of policy affairs (running a large fiscal deficit alongside what I expect will be an accommodative Fed), and you get very little relief by way of a slowing economy, and structurally higher go-forward inflation as a result.

As I type, weekend headlines are hinting:

Morning Note: Repricing Present Risk

 In Tuesday's morning note I wrote:

"As you've noticed, the Middle East conflict has heated back up markedly of late; interesting that risk assets, while taking somewhat of a hit last week (which may have been more about AI concerns than it was about Iran worries), have overall been holding up, I'd say remarkably well.

We can speculate whether, as is often the case, that's due to the sense that, as scary as they often seem, markets conclude that modern-day geopolitical frictions (even when they're kinetic) don't end up moving the needle as one might expect -- or is it that, in this instance, as long as the price of oil stays, say, sub-100ish, current general conditions are sufficiently positive to absorb the cost? Or is it the legitimate belief/understanding that the US administration will aggressively calm the waters if/when markets begin to crack -- thus leaving investors sanguine, and unwilling to capitulate to scary headlines?"

Well, while there were a couple of heavyweight outlook concerns expressed last evening, the market action this morning is hinting that oil "sub-100ish" may indeed go some distance in terms of explaining the relative sanguineness we've noticed in markets of late... I.e., as I type, global equities, save for those energy and healthcare (a presently meaningful weight in our core allocation)-related, along with precious metals and bonds are getting pretty well-hammered, as Brent crude is fetching $100.16/barrel (+6.1% on the morning), while WTI is trading at $91.40 (+4.6%).. Those are big one-day % moves, and, clearly, markets have noticed.

Morning Note

As I've maintained since the beginning of the year, even throughout the Middle East conflict, we remain (for the moment) constructive on global equities. 

Although that sentiment is on a pretty short leash... I've also maintained that we see not-small headwinds developing (per the 3rd paragraph in your morning wrap below) as we meander into the end of this year and on into next.

As for this morning, markets, save for bonds, are catching a bit of a bid... In terms of equities, this morning's bump embodies the selective character we've been noting of late.

Per Bloomberg's IMAP screen below, just roughly 40% of S&P 500 constituents are in the green thus far, while 4 sectors are either flat or in the red:

While the laggards, save for utilities, are meaningful weights in our core strategy, our commodity and non-US exposures are more than making up the difference thus far.

Bigger picture: As you've noticed, the Middle East conflict has heated back up markedly of late; interesting that risk assets, while taking somewhat of a hit last week (which may have been more about AI concerns than it was about Iran worries), have overall been holding up, I'd say remarkably well.

Offsetting Forces, and a Reprieve That (for now) Looks Short-Lived

The last line in our weekly macro note below captures how to be thinking about the immediate-term setup for markets:

"...the forces at work are large, and, for now, offsetting."

The short-lived reprieve I alluded to in the title is all about the latest inflation print and go-forward sentiment... The inflation print captured the US/Iran memo-of-understanding-inspired comedown in energy prices, while improved sentiment I suspect was largely inspired by the same... But, as I type, alas, the war is back on in notable force and energy prices are consequently back up, big!

Gasoline (the X marks July 1):

And, as you've likely noticed -- while other forces are in play as well (see yesterday's note) -- the stock market has taken notice.

The S&P 500 last week: 

Next week is relatively calm on the data front (although likely to be very volatile on the Hormuz front)... The following week features the Fed and the Bank of Japan respective meetings... While both are of course key to the ongoing assessment of go-forward probabilities, at this juncture markets will be hyper-focused on the latter... More on that to come herein.

In the meantime, here's your summary of our weekly PWA Index scoring, followed by this week's macro note* to clients:

Wildcards

Per the below, the tech space continues to suffer amid worries over the odds that the trillions being spent on AI will equate to sufficient future profits for those doing the spending, exacerbated overnight by competing developments out of China... While the Iran conflict remains a wildcard with political ramifications sufficient to keep the market anticipating compensating de-escalatory headlines every time things heat up (like the present). 

I'll circle back over the weekend with a macro deep dive.

In the meantime:

Under a Few Surfaces: Stocks, Gold, Silver, etc (video)

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Lots On Our Radar

The equity market continues to trade, let's say, all over the place... The S&P 500 Dispersion Index (measures how differently the members of the index are moving from one another) sits at a level we haven't seen since the Covid panic... The shaded area denotes levels where the index itself (blue line) tends to struggle:

Of course this doesn't mean that serious pain is imminent, it's just one indicator that says, despite the title of last week's macro note below, turbulence exists below the market's calm (or perhaps complacent) surface.

Per the macro summary below*, there's presently lots to monitor showing up on our radar:

Important Morning Note

I'll be away from my desk this weekend, so look for the usual weekly wrap on Monday morning.

For today, we'll jump to the morning wrap, which is fairly robust and captures some of the essence of our go-forward thesis*:

No Smooth Paths From Here

Per the below, we maintain that it does not serve the overall interests of either side of the Iran conflict to resume all out war at this juncture... That said, the geopolitical experts whom we contract with are noticing that Iran seems to aggravate tensions pretty much whenever the price of oil dips below ~$70/barrel, suggesting that Iran's incentives (somewhat, if not largely political relative to the timing of the US election cycle) has them willing to push the needle to keep the stress on the US electorate elevated. 

Hence, the reason for this morning's broad global selloff outlined below.

When Headlines Move Markets: A Word on This Morning's Action*

A Rising Bar

Per the note below, tech stocks (with the exception of Microsoft, which we recently added to) are getting hammered today despite some remarkable, nearly breathtaking, good news from the world's largest memory-chip maker overnight.

Stocks falling on good news is, let's say, not a good sign... That said, chip stocks, that one in particular, have gone so far, so fast, that the proverbial "buy-the-rumor-sell-the-news" event was for certain priced into the cards.

The "healthy" news is that some rotation continues... I.e., while the global tech sector gets hammered, our healthcare, staples and communication exposures are up solidly, financials are up marginally.

The other issue rocking global markets today is the resumption of kinetic action in the Strait of Hormuz (details below) which is adding to the pain in virtually all things, save for the positives mentioned above.

Here's your morning macro rundown*:

Bad News/Good News

The latest labor data did a slight number on this week's PWA Index score... Although, overall, we continue to see very low recession risk for the foreseeable future.

And while the latter, all else equal, paints a favorable picture for equities, all else, alas, is never equal.

Note that the equity market popped higher on Thursday's release of the weaker than expected June payrolls data and the -74k prior months' revision... I.e., for that moment bad news (being disinflationary) was good news for stocks... However, while the Dow held up nicely, by the end of the session the S&P 500 finished dead even, and the Nasdaq was down nearly 1% -- reflecting continued angst over the ramifications (sustainability, debt financing, profitability, valuations, ancillary players, etc.) of the continued massive AI-buildout.

Not to say that we're not in the near-term bullish camp -- we actually (cautiously) are -- however, as I keep expressing, the setup gets sketchy later this year/into next... More on that herein to come.

In the meantime, here's your summary of this week's PWA Index scoring, followed by a succinct macro note*:

Searching for Signal

I'm feeling compelled to take you into the short-term weeds with me a bit this morning, but first note that we definitely do not react to noise... However, we do forever look for potential signal within said noise.

Today, like many other days of late, is particularly noisy, and I do believe there is some signal, or perhaps some harbinger of potential things to come within.

In a nutshell, while, as I continue to point out, we're generally constructive on risk assets at the moment, we do see potentially serious headwinds developing late this year and into next... I'll be putting the whys (it's multi-faceted) into narrative that I'll share in the coming days.

In the meantime, here's the gist on today's action and how we're viewing it... This expresses our view of the moment -- we're relatively sanguine -- and hints at where we think some of the future pressure will come from (read mega-cap tech):

Chart of the Day: Messy Under the Hood

Following up on yesterday's video commentary (be sure to watch if you haven't yet) around the action among sectors of late, here's a look at the S&P 500 Dispersion Index -- which measures how differently the members of the index are moving from one another.

The white line measures dispersion, the blue represents the index itself... Note that we are currently well within the the range where volatility tends to pick up, in a not-always favorable fashion:

A Timely Look at Equities, Yields, The Dollar, Gold, Oil, Fed Funds Odds and Sectors (video)

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Weekly Roundup

While our narrative below acknowledges the Fed's latest messaging -- not only no rate cut in the offing, but, per fed funds futures odds, one hike fully priced later this year -- we see probabilities leaning against a rate hike between now and year end... Although, as implied below, we will continue to test our thesis and remain openminded to the possibility as we go.

At the same time, we actually believe that the perceived posture is on-balance warranted, based on our view of longer-term inflation reality... So it's not economic weakness that we necessarily see staying the Fed's hand, it's, frankly, our view of what the ultimate gameplan will be under its new leadership going forward.

Morning Note

We've flagged the longer-term AI capex concern multiple times, particular in video commentaries, over the past year or so...  Question today being, is the recent rout in tech stocks a signal that the market is finally sniffing out the risk that turning these hundreds of billions in AI infrastructure investment into sufficient revenue to justify it all may not occur in a market-friendly time horizon? 

Well, that's the case, at least per the headlines.

Next question being, is it the market simply putting investors on notice that the risk exists, only to come roaring back on the likes of Micron's earnings this week, or maybe something more concrete in terms of government entry (investment) into the AI space (as the president hinted after a recent Friday where said capex worry inspired the worst stock market selloff in a year)?

Answer: Time will tell... The last paragraph in the synopsis below speaks to how we're' managing the current setup.

Look for our weekly macro dive over the weekend -- I'll likely walk through some charts with you via video as well... The technicals are interesting right here.

In the meantime, here's your morning rundown*.

Messy

Suffice to say that markets have been trading in messy fashion of late... Correlations that you could count on since the beginning of the year were seemingly breaking down amid some notable rotation away from the ytd winners, into the losers (and the lagging winners).

Today, however, looks more like the previously established "norm." Gold, for one example, rising alongside rising equities, falling yields, and declining/stabilizing energy prices.

Per the synopsis below, this morning's inflation data came in hot, although at to slightly below expectations... Markets, for the moment, are trading that as a relief, alongside stellar earnings reported by Micron Technology last evening... The latter being an event that was approaching with great trepidation... Thus, additional relief there.

The real near-term tell will be whether or not today's rally gets faded over the coming days.

Our (always subject to change) current base case view remains constructive in the near-term -- say, July into October... We're less-sanguine beyond, based on current visibility.

In the meantime, here's today's morning rundown*: 

Thinking About Today's Uncomfortable Action

US technology, industrial and commodity stocks, along with pretty much the entire global equity complex, are seeing a notable selloff this morning. And while there are some pockets of strength (beneficiaries of some obvious rotation) -- financials, healthcare and consumer staples in particular -- the areas getting hit are essentially overwhelming the positives.

While indeed it is our view that we are now meandering through the late stage of the cycle, with its attendant volatility, our base case has remained overall constructive for the time being (specifically until we get into the latter part of this year and into next).

Those two words -- "attendant volatility" -- are the operative phrase at this juncture.

Here's how we're thinking about today's action*:

Morning Note

FYI clients, today happens to be "ex-dividend" day for a number of ETFs in our core allocation... Thus, for those of you who track this stuff daily, what you'll see today will be somewhat muted, as the affected ETFs will trade without the distributed quarterly dividend (i.e., lower), which will be credited back to your accounts this Wednesday.

In the meantime, here's a quick look* at the immediate-term setup:

Inflation Beyond Hormuz And, In the Meantime, Headline Whiplash

A break in our weekend festivities allowed me to finish up this week's macro commentary and get it to you on time after all... So here you go:

Regular readers will note my persistent (redundant, if you will) inflation commentary -- per your weekly rundown below... This is by design, for, at this juncture, I see the mainstream narrative (which is of course finding recent support as the oil price abates) around go-forward inflation to be rooted in a framework that simply doesn't express the populist-inspired-policy world we've morphed into, nor the related/attendant fiscal constraints, particularly in the US... So much so that it bears repeating, virtually ad nauseam!

As stated*:

The Wobble and The Focus

Despite market-friendly Middle East developments, investors yesterday were solely focused on the Federal Reserve board meeting, which they interpreted in a not-market-friendly way.

For me, the increasingly hawkish (inflation-fighting) sentiment among the members was no big surprise, but Warsh not effectively walking that back during the press conference was.

Now, saying that he'll be an aggressive inflation-fighting-via-higher-rates voice on the Fed is not my base case, given the dynamics I spelled out in yesterday's note... Specifically:

Fed Transparency and Constraints, and Some Highlights From Our Notes

For this morning's message I thought I'd just copy and share from additions to our internal log this week... The bulk of which happen to be a copy and pasting of the latest from one of our research sources, along with support, in one respect, for our long-term bullish gold thesis.

Of course, immediately-speaking, there's today's Fed meeting... To give you our take, here are some highlights from my part in a text conversation with a friend this morning... The topic being the supposed lack of communication to markets that the new chairman appears to advocate for going forward.

A Step Back From the Brink

While, as you've noticed in recent weeks, as diversified as it is, our core allocation can indeed experience quite the day-to-day volatility, in either direction.

This morning, of course, we're talking the direction everybody loves, and rightfully so... Per the note below, weekend events were resoundingly bullish for virtually all things, save for those that are energy/oil-related and economically defensive (read consumer staples and healthcare).

Speaking of oil, while the (yet to happen) opening of the Strait makes the price more palatable, make no mistake, over the course of the next few months a not-small quantity will go straight to storage (to replenish drawn inventory, and to establish new inventory in a world startled by how one actor can shut off meaningful supply), and, thus, not into the economy for consumption.

Your Weekly Roundup

While our synopsis below implies that (as recent data suggest) inflation should abate some when oil begins flowing, as I've flagged herein and in client meetings, a go-forward scenario where geopolitical risk becomes less prominent, and animal spirits ignite, will see demand for things beyond just oil rise broadly -- essentially keeping price-pressure (read inflation) very much alive and well.

I.e., suffice to say, the setup late this year into next may very well be characterized by a notable renewal in the rising inflation/interest rate trend, which can pose a serious headwind for risk assets.

In the meantime, it was quite the week last week for stocks.

S&P 500 Index 5-day chart:

Evening Rundown

Quite the eventful day today... Below is your evening rundown*. 

There'll be the usual deeper macro dive coming your way over the weekend:

Evening Note* — Thursday, June 11, 2026

A relief rally, and why the shape of our portfolio mattered

After a brutal Wednesday — when a three-year-high inflation print sent the major indexes to their lows — markets reversed hard today on signs that the Iran situation may be moving toward de-escalation. Reports out of Iranian state media suggested a deal is close, and risk assets responded in kind. The Russell 2000 led the way, up roughly 3%, with the Nasdaq (+2.5%), Dow (+1.9%), and S&P 500 (+1.75%) all posting healthy gains. The Dow climbed back above 50,000, and the market's "fear gauge," the VIX, fell nearly 12%.

Under the surface, the move had a distinct character. The leadership came from technology, industrials, and materials — the economically sensitive corners of the market that tend to do well when investors grow more confident. The laggards were the defensive and war-premium trades: energy, consumer staples, and real estate. In short, this was the market exhaling — unwinding the fear that had been priced in over weeks of Middle East tension.

How our core allocation behaved

Midweek Note

Per the synopsis below, along with our broad (although thematic) diversification, we manage an options strategy (for portfolios that, by size, qualify) designed to mitigate the major, protracted drawdowns... I.e., the pain we intend to quell is not the single digit % breaks the likes of which we saw last week -- although, indeed, there have been a number of instances when even those were notably muted -- it's the large, extended drawdowns that occur every so often in equity markets that we aim to quell.

So, in essence, and just to clarify, our goal is to mitigate said drawdowns while smartly capturing upside where it's to be had, which requires that we live through some, at times notable, downside volatility as a matter of course.

PWA Morning Note*: Wednesday, June 10, 2026 

---

The setup in one line

Your Weekly Roundup

Of course, given the latest action in markets, and the weekend headlines, there are bigger fish to fry in the minds of most people than last Friday's jobs report... That said, keep in mind, said report was not-small in terms of the conditions that characterized last week's swoon... Nevertheless, the world is waiting for tomorrow's opening market print with bated breath.

As I type, weekend markets are actually pointing to a (albeit slightly) green open for equities, for gold and even for bitcoin (which was also taken out to the woodshed last week)... Problem is, oil is up nearly 3% as well; which is contrary to what has been inspiring stocks, etc., in recent weeks... I.e., if all you would've told me is that oil's up 3% on a late June 2026 Sunday morning, I'd be telling you look out below come Monday's open!

How To Think About The Last Week In Markets (video)

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Making Sense of This Week's Selloff

In yesterday's note I suggested that a good jobs number this morning could spell bad news for stocks:

"Suffice to say that it (a strong jobs number) has the potential to throw some cold water on our positive-resolution-will-lift-stocks thesis, but not in the way you might think... Meaning, if the jobs number is really good, and the Hormuz news says smooth sailing to come, there's a chance that yields could actually rise in response."

Well, the headline (+172k) number was nearly double the consensus expectation (+88k), and, yes, stocks are feeling it this morning... The S&P 500 is down a full 1% as I type, while the Nasdaq 100 is down a whopping 1.97%... The Dow, on the other hand, benefiting of late from a rotation out of tech and into healthcare and financial names in particular -- is only down 0.33%.

The Current "Macro Brew" And Its Late-Year Implications

Suffice to say that these days some of the "normal," if not reliable, market indicators don't carry the oomph they otherwise would were it not for the turmoil in the Middle East... You've noticed that we haven't been boring you of late with our technical analyses (videos)... Not that they don't matter, but, again, in times like these a headline can kill a high-probability setup in the blink of eye, or faster than a tick on a chart.

That said, tomorrows jobs report matters.

As I've expressed herein, we're constructive on equities right here, as political and economic risk strongly supports the notion that the Strait will be open sooner than later... That's unambiguously bullish for equities initially... Although, as I type, chip stocks are getting hammered on a handful of reports that question the durability of the AI driven bonanza  -- the Nasdaq 100 Index is down 1.24% this morning, which is dragging the S&P 500 down 0.23%, while the Dow is up 580 points... Of course that's rotation, explained by yet another glimmer of hope this morning that peace is on the horizon.

Pressure Is On

Per the summation below, last night's tariff (proposal) announcement should be viewed as symbolic in that it says that the Administration is, as promised, not willing to relent to sentiment nor the Supreme Court on tariffs.

I suspect that's pressuring global equities at the margin this morning -- while the main culprit remains the middle east conflict.

Rational Analysis Notwithstanding

Seldom do we find our view of overall general conditions as inline with one of our research providers as it is presently with that of MRB Partners... I.e., the following snippets from their latest research report should sound very familiar to clients and regular blog readers:  

emphasis mine...

"The tight correlation between oil prices and global financial asset markets continues on a daily basis, subject to the ever-changing odds of a deal to re-open the Strait of Hormuz."

Morning Note: Very Messy Under the Surface -- And -- On Stocks and Interest Rates

What was looking like a decent start to the month for global equities in the premarket, got sideswiped by newsflashes like the following:

"Iran Halts Indirect Talks With U.S. Over Lebanon and Gaza Ceasefire Violations - Tasnim News

• Iranian negotiation team to stop dialogue and text exchanges through intermediaries
•  Move follows alleged violations of ceasefire conditions, including in Lebanon
•  Iranian officials demand immediate halt to Israeli operations in Gaza and Lebanon
•  Iran also demands full Israeli withdrawal from occupied areas in Lebanon before talks resume
•  Iran and resistance front reportedly resolved to fully block the Strait of Hormuz
•  Other fronts, including the Bab al-Mandeb Strait, could also be activated in response"

Yes, markets remain focused on the Iran conflict, despite the major indices floating around their all-time highs... Like I said yesterday (below), the underlying dynamic suggests the market has grown skeptical of resolution prospects:

Not What You'd Expect

Back from a brief getaway, although I stayed somewhat abreast of market and economic happenings while I was away.

Just a quick observation on the US equity market... While it seems intuitive to credit the ascent to all-time highs for the S&P 500 to optimism that an Iran resolution is close at hand, the underneath action of late pours a little cold water on that assumption.

For starters, a solid, durable resolution would initially be bullish for virtually all things equities, save, initially, for the energy related.

Thing is, while the S&P had an impressive May (+5%), 7 of 11 key US equity sectors actually lost money during the month... And, of the 4 that were positive, tech (top green line below) -- on earnings and hype -- did 80% of the lifting... I.e., without its heavy concentration in the tech sector, the S&P would've lost money in May!  That's not the broad-based rip-your-face-off-rally you'd expect in an all's clear scenario:

Weekly Rundown -- And -- Perhaps Some FOMO To Come, But Then What?

Per the synopsis below, our general conditions assessment was less bad week-over-week... Although there's nothing therein thus far that suggests to us that conditions are about to turn robustly positive.

That said, we do remain overall constructive, particularly on equity markets, over the next several months -- assuming present geopolitical angst begins to abate sooner than later -- the market action/reaction on the related headlines and associated commentary make that an easy call.

As for the latter part of the year, and beyond, however, we have to consider what happens if suddenly we get to move on without the proverbial "wall of worry" that typically accompanies sustainable bull markets... I.e., without some worry -- that inspires holding cash, shorting stocks, staying underweight, etc. -- where's the juice to come from to keep the market buoyant after everybody FOMOs, or YOLOs, in?

Quote of the Day: "Second-Round Inflation Risk"

While at first blush today's US PMI release reads positive, particularly for manufacturing, the weeds essentially support the stagflationary story we've been telling.

How Markets Digest "Good News"

I concur with the below from BCA… And I’ll add that the setup described leads to a surprisingly broad misunderstanding among market participants about the interaction between economic conditions and markets… I.e., good economic news can be (often is) bad news for stocks based on what it portends for market-based interest rates and for go-forward monetary policy – particularly in an "inflation focused" environment. 

On the flipside, good news is good news typically when we’re earlier in the cycle -- when earnings expectations are less-robust and rates are not near cycle highs; which is clearly not today.

Notwithstanding -- per the last paragraph from me below -- the likely good-news-boost we'd see were the strait to open tomorrow (since, for the moment, geopolitics utterly dominates market sentiment)... Case in point the market bump that just occurred, literally a I type, on the following headline:   stocks middle panel

Evening Note: Never a Dull Moment!

 "Never a dull moment" is an understatement these days!

In our weekend rundown I hinted that we're exploring hedging some our non-US exposure based on the prospects for central banks tightening policy and the attendant market implications of such a move.

Here's that paragraph:

The Economy Is Growing. Prices Are Growing Faster...

Per the following synopsis, we maintain our view that recession risk remains low, despite a negative PWA Index print.

As you'll note below, there are real positives in spots among the data, while the inflation picture is nothing but negative... On net, this is that stagflationary risk we've been signaling for months.

As I've mentioned in virtually every client review of late, if we're having the same geopolitical conversation six months from now, we will likely have made notable adjustments along the way... Thus far, as you've gleaned from the volume of transaction confirmations of late, we're already actively adjusting at the margin.

While we're sitting right near our year-to-date peak, representing a very nice four-month gain in our core portfolio -- validating our overall strategy thus far -- Friday was nevertheless a rough day, as global equity, currency, and commodity markets suddenly cared about rising yields (read inflation risk), and are, thus, legitimately beginning to wonder if indeed a Hormuz resolution is at hand.

Here's your thorough weekly rundown:

Morning Note: China Talks Disappoint

The last paragraph in the rundown below does a good job describing the action among our core positions this morning.

The bottom line in terms of today's global selloff, also covered below, is the lack of any official message out of this week's US/China talks suggesting China is stepping in to assist in resolving the Iran situation... That'll no doubt at some point change if the Strait of Hormuz is not opened sooner than later.

We'll have a thorough macro update for you over the weekend.

In the meantime, here's this morning's rundown*:

Morning Note: The Goal

Following up on yesterday's hot CPI print, markets are wrestling with a scalding hot PPI (producer prices) report this morning.

Here's from Bespoke Investment Group's morning note:

"Headline PPI surged 1.4% - not y/y but m/m while the core reading surged 1.0% versus estimates for an increase of just 0.3%. The headline index was only forecast to increase 0.5%. PPI tends to be more volatile than CPI, but these numbers are hot, hot, hot. As you would expect, the immediate response in the futures market was for yields to spike higher while equities erased half of their pre-release gains."

We've maintained all along that the goal of the President's China trip this week is to come away with a warm embrace and all (or some) manner of win/wins on trade, etc... That's the goal anyway, and the following on the International Energy Agencies latest Oil Market Report* just adds additional incentive to that aim.

Morning Rundown

Virtually all things that have been working of late are taking quite the hit this morning. Oil importing regions and US tech stocks in particular.

Thus, days like these are ones we feel, given our current allocation… That said, clients, as you’ve noticed, we’ve been notably active of late... This morning, in fact, we reduced our US tech exposure by 30%, adding to US healthcare, financials, and communication stocks with the proceeds… The move essentially amounts to a rebalancing (a bit) away from an overextended area into notably under-appreciated sectors that have actionable theses in and of themselves.

Here’s this morning‘s macro rundown*:

K-Shaped YOLO

In yesterday's commentary I referenced the literally rock-bottom (all time low) state of consumer sentiment, per the UOM survey that began in 1952.

Now, allow me to turn that thought completely on its head and offer up last week's earnings call highlights from the venues that you'd think would be suffering mightily -- given how consumers reportedly feel about their current state of financial affairs (HT Peter Boockvar):